The development and operation of commercial accommodation raises complex regulatory, contractual, commercial and taxation issues.
Strong investor demand continues for investment in commercial accommodation in the hotel, serviced apartment and student accommodation sectors.
The hotel property sector is currently outperforming all other classes, particularly in Melbourne and Sydney, with 22% Chinese visitor growth the dominant contributor resulting in continued strong interest by investors based on projected 10 year expected growth of international visitors (5.6%) and domestic visitors (3.1%) annually.1
The serviced apartment industry has been the strongest performing accommodation sector over the past decade with a 4.7% revenue increase due to international and domestic business traveller resulting in continued strong interest by investors as room numbers pipeline keep pace with demand.1
Purpose built student accommodation development projects anticipate 5.5% growth in beds in Melbourne (2017-2018) resulting in continued strong interest by investors who are closely watching occupancy uptake and stabilisation of new assets in the current project pipeline.2
Hotels, serviced apartments and student accommodation developments have tested the demarcation between residential premises and commercial residential premises for various taxes. Structuring developments is becoming more complex (particularly mixed developments) as developers are seeking alternate funding/investment structures to finance capital development costs.
This paper discusses selected regulatory, contractual, commercial and taxation issues in the hotel, serviced apartments and student accommodation sectors of commercial accommodation including:
- technical categorisations of commercial accommodation;
- market analysis of commercial accommodation;
- FCT audit activities; and
- structuring approaches and tax issues for the development activities.
This paper does not discuss other forms of commercial accommodation or sharing-economy residential accommodation (e.g. Airbnb, Stayz) which is treated as residential leasing nor structuring approaches and tax issues for the accommodation management activities.
1 IBIS World, Serviced Apartments in Australia: Market Research Report January 2017ˆ.
2 Savills, Australian Student Accommodation Market Report 2017 at 40.
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